Polanyi
Berrak Kibar
2011300291
EC 412.01
Final Paper
"Polanyi argued that land, labor and money became fictitious commodities in the age of capitalism. Consider whether we can add knowledge to the above list."
Polanyi introduced a variety of new terms into our lives; some of which are of extreme importance, such as fictitious commodities, embeddedness and double movement. He believed that economic activities were in fact embedded in social life and were affected by noneconomic activities and believed that “a market economy can exist only in a market society” (Polanyi, 1957: 71). According to him, markets have always existed except for the most primitive societies, and with the start of the development of a market economy as we know it, the factors of production were started to become commodified. Polanyi focused on the commodification of land, labor and money in the age of capitalism in his work, but the capitalist scene in the world we are living in now is subjected to many …show more content…
changes. With the shift towards a more knowledge-based economy from the traditional sense of capitalist market Polanyi based his work on, it is now possible to consider whether knowledge can be considered to be the subject of the commodification process as well.
In this paper, first I will define fictitious commodities in Polanyian understanding, give examples for what can be considered as a fictitious commodity and why, and continue with an analysis of how the society responds to the commodification of certain aspects of life. Then, I will continue with the explanation of the shift from a traditional economy based on traditional factors of production to a Knowledge Based Economy that is fueled by knowledge, innovation, information, creativity and design. After elaborating on the Knowledge Economy, I will continue with an analysis of knowledge and how it is commodified; and wrap up with the possible outcomes of the commodification of knowledge and a brief picture of the Knowledge era we are living in at the moment.
A commodity, for Polanyi, is something that is produced to be sold. Polanyi argues in his book The Great Transformation that land, labor and money are turned into commodities by the structure of the market economy, and these three are in fact not produced to be sold in the market even though they come with a price. Land, labor and money are named fictitious commodities by Polanyi, and it is argued that if these are considered to be commodities to be sold in the market, this will bring about problems and crises in the current capitalistic market structure. These fictitious commodities are vital parts of the capitalistic system with a self-regulating market economy, as the markets for land, labor and money were created through the existence of these fictitious commodities, but it is also argued that these fictitious commodities are not sustainable under the conditions of the same system.
Labor and land were defined as “no other than the human beings themselves of which every society consists and the natural surroundings in which it exists” by Polanyi in his book The Great Transformation, and according to him, money was just a social creation that existed to symbolize the purchasing power, in his exact words on the same book, “merely a token of purchasing power which, as a rule, is not produced at all” (Polanyi, 1957). But there was a supply and a demand for both land and labor; therefore even though they were not created to be the object of market transactions, in the end they turned out to be so and a market for land and a market for labor emerged so as to generate profits from these fictitious commodities.
Polanyi suggested that societies were inclined to protect themselves and fight back against the laissez-fair economy and the instruments of it. This phenomenon is named “double movement” and is the key to his argument that capitalism is not a sustainable economic regime. The market economy controls the real commodities, but at the same time the same rules apply to fictitious commodities as well; which will create an opposition between the self-regulating liberal market and the social protection that aims at preserving nature and the man.
Polanyi believed that “a market economy can exist only in a market society” (Polanyi, 1957: 71) and therefore all the social relations were “embedded in the economic system”. This requires the society to be organized in a way that would pave the way for the market economy to function based on its rules.
Understanding Polanyi’s idea of fictitious commodities is of great importance as with the changes in the economy continue to bring about more discussions whether there are more fictitious commodities in the age we are currently in.
Starting in the late 1950s, the economy and the factors of production were subjected to a transformation. With the rise of new technologies, especially in the developed countries, that were driven by knowledge and information; the economy started to drift farther and farther away from the traditional economy that had its roots in the Industrial Revolution. There was a shift from the necessity for a big labor force, exploitation of the labor force and the natural resources to generate the maximum number of profit; to an economy that was based on information and knowledge; that was named the “Knowledge Economy” in the 1960s. Newly developed knowledge was applied to a variety of fields; such as technology, health, farming, and the economy and was used in many ways to increase the efficiency, improve the previous methods and developing further knowledge. This newly created Knowledge Economies supported the usage of knowledge and information production, innovation, highly skilled labor, alleviation of the education and health and many others.
In the Post Industrial era market economy that was based on knowledge, knowledge is considered to be a factor of production, just like land and labor, as it is the factor used for production that generates wealth and profits. Here, the question whether knowledge is a commodity that was produced to be sold on the market comes to mind, which in turn leads to questioning if knowledge as a factor of production can be considered a fictitious commodity similar to land and labor with the Polanyian understanding.
Polanyi considers knowledge to be just another “aspect of man” (Polanyi, 1957), as it is a part of human capital. But in the Knowledge Economy, knowledge and information come with a price. But it is possible to question whether knowledge in fact is created for sale. Looking from different viewpoints, the answer to this question could be yes or no. It is not possible to say that the sole purpose of creating knowledge is economic motivation. But, although knowledge can be created without the goal of being sold, in some cases, it actually is created for this aim. Especially considering the era we are living in that values knowledge, education, innovations and technology much more highly compared with the generations before and with the government incentives, it is not correct to disregard those who in fact create knowledge with a solely market motivated approach. In this new system, knowledge is given a price even if it is produced for sale or not, so that the Knowledge Economy can keep operating without encountering any problems.
To understand whether it is possible to add knowledge to the list of factors of production that were named as fictitious commodities by Polanyi, there is a need to analyze whether knowledge can be considered a commodity in the first place. It is possible to say that knowledge is not subjected to scarcity and is produced in a collective manner. There is no specific production function for knowledge as knowledge is a complex phenomenon; and there is not an input-output relationship for the production of it.
There are a variety of ways by which knowledge can be commodified. For example, Schiller argued that “Information is not inherently [economically] valuable… a profound social reorganization is required to turn it into something valuable” (Schiller, 1988: 32). So, according to Schiller, through social reorganization, it is in fact possible to turn knowledge into a commodity. Another way by which knowledge can be turned to a commodity is when tacit knowledge of workers are incorporated into machines and used as a factor of production through this mechanism. Knowledge can also be turned into a fictitious commodity via moving from a resource generated collectively to an intellectual property to generate profits.
Knowledge is gaining more and more importance in the current neoliberal market economy as it is now a vital part of the development of technical and social aspects of production. But although the attention given to knowledge is increasing, it is still vastly difficult to understand economic aspects of knowledge, its use value and exchange value, how it creates profits and surplus value for firms.
In the modern Knowledge Economy that is market motivated, dominated by neoliberal ideas and is aiming at generating more profits; knowledge is an important tool that can be used as a factor of production. In this neoliberal Knowledge Economy, knowledge takes the appearance of a commodity in many ways.
When knowledge freely circulates in the market, is being exploited by the capitalist firms, is separated from the physical labor, or is turned to a good or service that is open for sale in the markets; then it is possible to define knowledge as a fictitious commodity just like labor. Also, when we observe that those who generate the most amount of profits are the capitalist firms that use information, innovation and knowledge as factors of production instead of the firms that are stuck with using the regular factors of production, it is safe to say that knowledge can indeed be considered as a fictitious commodity.
Although when analyzing the Knowledge Economy, the positive sides of it may appear to be vastly beneficial for the society, there are some downsides of this neoliberal market system that paves the way for many problems, some of which may eventually be detrimental for the society.
For example, capital owners that want to obtain the maximum amount of profits in a competitive environment that drives the generation of more and more knowledge, information, innovation and creativity; choose not to pay a high price for knowledge as a factor of production but expect a high price to be paid for the output that is produced.
Another problem is that although there is a high, and ever-increasing level of competition in this market, capitalist firms are still clinging onto the high levels of profits coming from knowledge, information, creativity and innovation. In a market with such fierce competition and diversity, it is possible to question whether this system with monopolistic ideals is sustainable or
not.
If we look at these problems from a Polanyian perspective, it brings about the question whether these may lead to a double movement in the society, as an answer to ever-increasing exploitation and dependence on knowledge and innovation. The Polanyian understanding of double movement can be applied here because just like the counter movement that occurs after the growing expansion of commodification of land and labor; there is a possibility of a counter movement against the increasing commodification of knowledge and the Knowledge Economy.
Governments possess a big role in the Knowledge Economy, and this role takes two very different forms, supporting and at the same time trying to limit the commodification of knowledge. First, the government takes part in creating an environment where knowledge accumulation is protected by intellectual property rights in different forms and each government is molding the laws in a way that will bring them more advantage in terms of the knowledge, information and creativity their market possesses when compared to others. They are creating an environment in which the producers of knowledge such as the universities understand the needs of the capitalist firms and where knowledge and information are managed and exploited under well structured laws. There is also the movement towards incorporating knowledge into labor in the production processes, especially through training programs that take a variety of forms; many of which are government supported.
Although no vast counter movement against the commodification of knowledge that can bring the Polanyian idea of “double movement” has occurred so far, it is possible to see that not everyone can easily keep up with the advancements of technology, innovations, new systems all produced by new knowledge, information, creativity and design. Many low-skilled workers are trying to find themselves a sustainable, safe place in this fierce competition; which is becoming more and more difficult as time passes. Developed countries are exploiting knowledge, innovation, creativity more and more and in this environment, creating knowledge for sale is becoming more and more profitable, therefore many people are drifting towards this direction, unlike the past generations. In the era we are living in, it is impossible to keep up with the competition if you cannot understand the knowledge created by others, create knowledge yourself, bring a creative touch to whatever it is that you are doing.
It is possible to guess that a wide-scoped counter movement may start eventually against the ever-growing Knowledge Economy. Otherwise, in this fierce competition, you either create knowledge, or you are doomed to fail.
References
Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon, 1957.
Polanyi, Karl, and Harry W. Pearson. The Livelihood of Man. New York: Academic Press, 1977.
Roberts, J. Timmons., and Amy Hite. The Globalization and Development Reader: Perspectives on Development and Global Change. Malden, MA: Blackwell Pub., 2007.
Jessop, Bob. The Future of the Capitalist State. Cambridge, UK: Polity, 2002.
Schiller, Dan. How to Think about Information. Urbana: University of Illinois Press, 2007.
Mosco, V., & J. Wasko (eds). The Political Economy of Information. Madison, Wisconsin: University of Wisconsin Press, 1988.
2011300291
EC 412.01
Final Paper
"Polanyi argued that land, labor and money became fictitious commodities in the age of capitalism. Consider whether we can add knowledge to the above list."
Polanyi introduced a variety of new terms into our lives; some of which are of extreme importance, such as fictitious commodities, embeddedness and double movement. He believed that economic activities were in fact embedded in social life and were affected by noneconomic activities and believed that “a market economy can exist only in a market society” (Polanyi, 1957: 71). According to him, markets have always existed except for the most primitive societies, and with the start of the development of a market economy as we know it, the factors of production were started to become commodified. Polanyi focused on the commodification of land, labor and money in the age of capitalism in his work, but the capitalist scene in the world we are living in now is subjected to many …show more content…
changes. With the shift towards a more knowledge-based economy from the traditional sense of capitalist market Polanyi based his work on, it is now possible to consider whether knowledge can be considered to be the subject of the commodification process as well.
In this paper, first I will define fictitious commodities in Polanyian understanding, give examples for what can be considered as a fictitious commodity and why, and continue with an analysis of how the society responds to the commodification of certain aspects of life. Then, I will continue with the explanation of the shift from a traditional economy based on traditional factors of production to a Knowledge Based Economy that is fueled by knowledge, innovation, information, creativity and design. After elaborating on the Knowledge Economy, I will continue with an analysis of knowledge and how it is commodified; and wrap up with the possible outcomes of the commodification of knowledge and a brief picture of the Knowledge era we are living in at the moment.
A commodity, for Polanyi, is something that is produced to be sold. Polanyi argues in his book The Great Transformation that land, labor and money are turned into commodities by the structure of the market economy, and these three are in fact not produced to be sold in the market even though they come with a price. Land, labor and money are named fictitious commodities by Polanyi, and it is argued that if these are considered to be commodities to be sold in the market, this will bring about problems and crises in the current capitalistic market structure. These fictitious commodities are vital parts of the capitalistic system with a self-regulating market economy, as the markets for land, labor and money were created through the existence of these fictitious commodities, but it is also argued that these fictitious commodities are not sustainable under the conditions of the same system.
Labor and land were defined as “no other than the human beings themselves of which every society consists and the natural surroundings in which it exists” by Polanyi in his book The Great Transformation, and according to him, money was just a social creation that existed to symbolize the purchasing power, in his exact words on the same book, “merely a token of purchasing power which, as a rule, is not produced at all” (Polanyi, 1957). But there was a supply and a demand for both land and labor; therefore even though they were not created to be the object of market transactions, in the end they turned out to be so and a market for land and a market for labor emerged so as to generate profits from these fictitious commodities.
Polanyi suggested that societies were inclined to protect themselves and fight back against the laissez-fair economy and the instruments of it. This phenomenon is named “double movement” and is the key to his argument that capitalism is not a sustainable economic regime. The market economy controls the real commodities, but at the same time the same rules apply to fictitious commodities as well; which will create an opposition between the self-regulating liberal market and the social protection that aims at preserving nature and the man.
Polanyi believed that “a market economy can exist only in a market society” (Polanyi, 1957: 71) and therefore all the social relations were “embedded in the economic system”. This requires the society to be organized in a way that would pave the way for the market economy to function based on its rules.
Understanding Polanyi’s idea of fictitious commodities is of great importance as with the changes in the economy continue to bring about more discussions whether there are more fictitious commodities in the age we are currently in.
Starting in the late 1950s, the economy and the factors of production were subjected to a transformation. With the rise of new technologies, especially in the developed countries, that were driven by knowledge and information; the economy started to drift farther and farther away from the traditional economy that had its roots in the Industrial Revolution. There was a shift from the necessity for a big labor force, exploitation of the labor force and the natural resources to generate the maximum number of profit; to an economy that was based on information and knowledge; that was named the “Knowledge Economy” in the 1960s. Newly developed knowledge was applied to a variety of fields; such as technology, health, farming, and the economy and was used in many ways to increase the efficiency, improve the previous methods and developing further knowledge. This newly created Knowledge Economies supported the usage of knowledge and information production, innovation, highly skilled labor, alleviation of the education and health and many others.
In the Post Industrial era market economy that was based on knowledge, knowledge is considered to be a factor of production, just like land and labor, as it is the factor used for production that generates wealth and profits. Here, the question whether knowledge is a commodity that was produced to be sold on the market comes to mind, which in turn leads to questioning if knowledge as a factor of production can be considered a fictitious commodity similar to land and labor with the Polanyian understanding.
Polanyi considers knowledge to be just another “aspect of man” (Polanyi, 1957), as it is a part of human capital. But in the Knowledge Economy, knowledge and information come with a price. But it is possible to question whether knowledge in fact is created for sale. Looking from different viewpoints, the answer to this question could be yes or no. It is not possible to say that the sole purpose of creating knowledge is economic motivation. But, although knowledge can be created without the goal of being sold, in some cases, it actually is created for this aim. Especially considering the era we are living in that values knowledge, education, innovations and technology much more highly compared with the generations before and with the government incentives, it is not correct to disregard those who in fact create knowledge with a solely market motivated approach. In this new system, knowledge is given a price even if it is produced for sale or not, so that the Knowledge Economy can keep operating without encountering any problems.
To understand whether it is possible to add knowledge to the list of factors of production that were named as fictitious commodities by Polanyi, there is a need to analyze whether knowledge can be considered a commodity in the first place. It is possible to say that knowledge is not subjected to scarcity and is produced in a collective manner. There is no specific production function for knowledge as knowledge is a complex phenomenon; and there is not an input-output relationship for the production of it.
There are a variety of ways by which knowledge can be commodified. For example, Schiller argued that “Information is not inherently [economically] valuable… a profound social reorganization is required to turn it into something valuable” (Schiller, 1988: 32). So, according to Schiller, through social reorganization, it is in fact possible to turn knowledge into a commodity. Another way by which knowledge can be turned to a commodity is when tacit knowledge of workers are incorporated into machines and used as a factor of production through this mechanism. Knowledge can also be turned into a fictitious commodity via moving from a resource generated collectively to an intellectual property to generate profits.
Knowledge is gaining more and more importance in the current neoliberal market economy as it is now a vital part of the development of technical and social aspects of production. But although the attention given to knowledge is increasing, it is still vastly difficult to understand economic aspects of knowledge, its use value and exchange value, how it creates profits and surplus value for firms.
In the modern Knowledge Economy that is market motivated, dominated by neoliberal ideas and is aiming at generating more profits; knowledge is an important tool that can be used as a factor of production. In this neoliberal Knowledge Economy, knowledge takes the appearance of a commodity in many ways.
When knowledge freely circulates in the market, is being exploited by the capitalist firms, is separated from the physical labor, or is turned to a good or service that is open for sale in the markets; then it is possible to define knowledge as a fictitious commodity just like labor. Also, when we observe that those who generate the most amount of profits are the capitalist firms that use information, innovation and knowledge as factors of production instead of the firms that are stuck with using the regular factors of production, it is safe to say that knowledge can indeed be considered as a fictitious commodity.
Although when analyzing the Knowledge Economy, the positive sides of it may appear to be vastly beneficial for the society, there are some downsides of this neoliberal market system that paves the way for many problems, some of which may eventually be detrimental for the society.
For example, capital owners that want to obtain the maximum amount of profits in a competitive environment that drives the generation of more and more knowledge, information, innovation and creativity; choose not to pay a high price for knowledge as a factor of production but expect a high price to be paid for the output that is produced.
Another problem is that although there is a high, and ever-increasing level of competition in this market, capitalist firms are still clinging onto the high levels of profits coming from knowledge, information, creativity and innovation. In a market with such fierce competition and diversity, it is possible to question whether this system with monopolistic ideals is sustainable or
not.
If we look at these problems from a Polanyian perspective, it brings about the question whether these may lead to a double movement in the society, as an answer to ever-increasing exploitation and dependence on knowledge and innovation. The Polanyian understanding of double movement can be applied here because just like the counter movement that occurs after the growing expansion of commodification of land and labor; there is a possibility of a counter movement against the increasing commodification of knowledge and the Knowledge Economy.
Governments possess a big role in the Knowledge Economy, and this role takes two very different forms, supporting and at the same time trying to limit the commodification of knowledge. First, the government takes part in creating an environment where knowledge accumulation is protected by intellectual property rights in different forms and each government is molding the laws in a way that will bring them more advantage in terms of the knowledge, information and creativity their market possesses when compared to others. They are creating an environment in which the producers of knowledge such as the universities understand the needs of the capitalist firms and where knowledge and information are managed and exploited under well structured laws. There is also the movement towards incorporating knowledge into labor in the production processes, especially through training programs that take a variety of forms; many of which are government supported.
Although no vast counter movement against the commodification of knowledge that can bring the Polanyian idea of “double movement” has occurred so far, it is possible to see that not everyone can easily keep up with the advancements of technology, innovations, new systems all produced by new knowledge, information, creativity and design. Many low-skilled workers are trying to find themselves a sustainable, safe place in this fierce competition; which is becoming more and more difficult as time passes. Developed countries are exploiting knowledge, innovation, creativity more and more and in this environment, creating knowledge for sale is becoming more and more profitable, therefore many people are drifting towards this direction, unlike the past generations. In the era we are living in, it is impossible to keep up with the competition if you cannot understand the knowledge created by others, create knowledge yourself, bring a creative touch to whatever it is that you are doing.
It is possible to guess that a wide-scoped counter movement may start eventually against the ever-growing Knowledge Economy. Otherwise, in this fierce competition, you either create knowledge, or you are doomed to fail.
References
Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon, 1957.
Polanyi, Karl, and Harry W. Pearson. The Livelihood of Man. New York: Academic Press, 1977.
Roberts, J. Timmons., and Amy Hite. The Globalization and Development Reader: Perspectives on Development and Global Change. Malden, MA: Blackwell Pub., 2007.
Jessop, Bob. The Future of the Capitalist State. Cambridge, UK: Polity, 2002.
Schiller, Dan. How to Think about Information. Urbana: University of Illinois Press, 2007.
Mosco, V., & J. Wasko (eds). The Political Economy of Information. Madison, Wisconsin: University of Wisconsin Press, 1988.